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You are the manager of a large trendy online retailer head quartered in the North East that currently employs 17 unskilled workers and 6 semiskilled workers at its warehouse to box and ship the products it sells online. Your company pays its unskilled workers the minimum wage but pays the semiskilled workers $18.00 per hour. Thanks to government legislation, the minimum wage in your state will increase from $10.25 per hour to $12.75 per hour. Discuss the implications of this legislation for your company’s operations and in particular the implications for your optimal mix of inputs and long-run investment decisions as well as the profit implications. Discuss how diminishing returns are likely to set in at the warehouse and discuss how management can respond to this situation.
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